Grab These 8 Individual Tax Breaks Expiring Year End 2013
It may be your last chance to snag a tax credit for making green home renovations or buying an electric vehicle, or to partake in other popular tax breaks that are expiring at year-end 2013 if Congress doesn’t act to extend them. Sound familiar? It’s a story played out over and over as Congress dithers on tax reform and leaves taxpayers and their tax advisers hanging.
In its 2013 Year-End Tax Planning Special Report, tax publisher CCH, a Wolters Kluwer business, lists these sunsetting “ tax extenders” and says that taxpayers should consider acting now, before year-end 2013, whenever possible, to take advantage of these breaks. “Whether Congress will extend them again is questionable,” the report says. “While all have their supporters, Congress appears likely to take an extremely budget-conscious approach toward any tax provision it may consider.”
That said, here’s a rundown for your consideration before the New Year.
Remodeling your home for energy-efficiency. There’s a $500 tax credit (that’s a dollar for dollar savings) for making certain energy-efficient improvements to your home like putting in a new front door, added insulation or a corn stove. The credit is 10% of the cost of building materials, so if the cost is $5,000 you get $500 back courtesy of Uncle Sam. One big caveat: The $500 credit applies to cumulative claims for the credit dating back to 2006. For details, see Fiscal Cliff Deal Helps Pay For Green Home Remodels.
Get an electric vehicle. A tax credit for certain 2 or 3 wheeled electric vehicles expires at year-end. A separate tax credit of $7,500 is available for 4-wheeled electric vehicles including the 2012-2014 Ford Focus Electric, the 2013 Ford Fusion Energi, the 2013 Ford C Max Energi and the 2011-2012 Nissan Leaf and will be phased out once a manufacturer’s has sold 200,000 vehicles.
Commuter benefits. The transit parity tax break—putting train commuters on the same footing as car commuters who park so they can defer $245 a month of pretax salary to use for commuting expenses—is in danger yet again. If you commute and your employer offers the benefit, make sure you’re taking advantage of it for the rest of the year. And then for 2014, sign up through your employer, and if Congress extends the break retroactively, you’ll be more likely to be able to get money back. For how employers dealt with the 2012, see Collecting Retroactive Break Befuddles Commuters Burdens Employers.
Donate conservation property. Through year-end conservationists who donate property or easements on their property to conservation organizations like the Nature Conservancy or a local land trust get an enhanced tax break that’s helped modest-income landowners; these enhancements are good through year-end. For more details, see Good And Bad News For Conservationists In The New Tax Law.
Charitable contributions from your IRA. If you’re 70 and a half or older, you can transfer up to $100,000 out of your Individual Retirement Account to charity. For some taxpayers, this is more tax-efficient than taking the required IRA distributions, paying income tax on those distributions and then giving to charity and getting an income tax deduction for the charitable gift. I described how the math works in the Forbes story Charity Strategy when the technique first became available in 2006.
State and local sales tax. CCH pegs this one as “the most politically-backed extender” so you probably don’t have to worry about it going away. But to be safe, if you’re a taxpayer who deducts state and local sales tax (in lieu of state and local income tax) and you’re contemplating big purchases in the near term you might want to make them in 2013.
Teacher’s classroom expense deductions. For school teachers who buy school supplies out of pocket, they get an above-the-line deduction of up to $250 for unreimbursed expenses. So it might pay to stock up on classroom supplies for the whole school year before year-end.
Exclusion of cancellation of indebtedness on principal residence. Taxpayers who are seeking debt modification or facing a short sale or foreclosure can exclude from income cancellation of mortgage debt of up to $2 million on their home. Forbes contributor Tony Nitti describes how this works here.
Make it a great day!